Brokers using LOIs to gate-keep early

March 31, 2025

by a searcher from London Business School in Boston, MA, USA

I've been finding many of the brokers I'm dealing with are only offering single-page teasers post NDA. After requesting more information, I'm given a boilerplate response along the lines of: "Our process requires submission of an LOI before distributing further information."

Is anybody else finding this? Is this a new approach for brokers to weed out tire-kicking Searchers?

One mentor of mine said just to issue a relatively vague yet professional LOI with the expectations of re-trading. I'd be more comfortable doing this with an IOI, but it seems like submitting IOIs doesn't satisfy the brokers. I'm hesitant to spend time on deals that I'd expect to re-trade, but is this part of the process in 2025?

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Reply by an intermediary
from Royal Melbourne Institute of Technology in Sydney NSW, Australia

What a strange approach. The reality is that brokers all over the world are frustrated with Searchers. There is a lot of talk and bluster about being able to invest, and often this is not backed by real money, or an ability to pull the trigger. So many feel burnt by the experience.
However, there are lots of unprofessional brokers out there too, and this would be equally frustrating for investors.
I typically represent sellers, but also buyers on occasions...so I see both sides.
In this case, I would not be submitting an LOI with limited information. But let's look at the problem the broker is trying to solve...and I am guessing here, but I suspect it is: a) they don't want to do work unless they know you're serious, b) they are looking to manage confidentiality for their clients and not release anything unless they know you are serious.
The reality is the process or method they are using is not ideal. But it doesn't change the problem. Personally, I would request a meeting (online). I would craft a good message around your approach to investing, why you are established and ready to invest, how you're different from the noise in the market, and that you're willing to discuss some logical steps forward.
I think an LOI needs to have some numbers in it...but that's near impossible to do with more information. Even if you verbally said...we are looking at businesses like this in the X-Y multiple range. Of course, we would need more information to work out where this business sits in that range. Then ask the broker, what is the real issue we are trying to solve and how do we go about that in a meaningful way.
Your willingness to collaborate, and have a straight, but professional conversation will differentiate you already. If the broker still doesn't want to share any information, then you should question whether you would ever be able to get a deal done, and it could be a waste of time.

Reply by a searcher
from Massachusetts Institute of Technology in Boston, MA, USA

The level of gatekeeping typically correlates with two key factors: the quality of the business being sold and, inversely, the perceived attractiveness of the buyer. In our experience, we've noticed that truly quality businesses usually come with solid teasers and data books—even if they're not exhaustively detailed, they provide enough substance for crafting a meaningful LOI. When dealing with a competitive process, one's best bet is to differentiate oneself in the buyer pool and strategically align with the broker's process, even if it feels rushed or premature. If they're asking for an LOI early, there's usually a reason. Submit well-crafted LOIs with clear contingencies and assumptions listed. This shows professionalism while protecting your interests. Make the LOI specific enough to show you're serious but flexible enough to allow for adjustments as more information becomes available. (I would avoid looking at it from the lens of re-trading). That said, good to exercise caution with deals that come with suspiciously thin CIMs or where brokers are extremely tight-fisted with basic information. These would probably lead to dead ends or significant time waste.

While it's frustrating to feel pressured into early LOIs, the real question shouldn't be whether one should "play the game", but rather how one should "play it smartly". If the initial materials show promise and the broker has a solid reputation, a carefully structured LOI can be your ticket to accessing better information while maintaining your ability to make adjustments against contingencies. An effective alternative is to focus on proprietary deal flow. When you can find opportunities outside the competitive broker process, you can often build direct relationships with sellers and conduct due diligence at a more natural pace.

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